Austria Passes Minimum Ticket Prices And New Airline Taxes

Austria’s government bailed out Austrian Airlines with about half a billion dollars, even after its German parent obtained a $9.8 billion aid package. Part of Austria’s bailout includes moves to protect the airline from competition, under the guise of environmental responsibility.

Last summer Lufthansa’s CEO declared that only the wealthy should fly arguing that the cheapest flights offered by competitors are “economically, ecologically, and politically irresponsible.”

At the time I pointed out that the German flag matches low fares in the market so they can’t be too immoral and they were in the process of restructuring their own low cost carrier Eurowings.

Lufthansa wanted governments to ban low fares so they can charge customers more money. And all it took was a global pandemic to get there.

As part of the Austrian government’s bailout of Lufthansa subsidiary Austrian Airlines, there are two attacks on low cost carriers included that will protect Austrian from competition.

  • Minimum ticket price on all bookings to or from Austria of 40 euros (US$45)

  • New 12 euro (US$13.50) flight tax. Fixed taxes disproportionately hurt airlines charging low fares. $13.50 is a much higher percentage of $45 than it is of $135.

  • The ticket tax will be €30 for flights under 350 km, to encourage use of rail rather than cheap flights.

During the regulated era in the U.S. the Civil Aeronautics Board set airlines prices. That was meant to prevent ‘ruinous competition’ that might hurt airline profits. Even during the last years of the CAB though they allowed ‘experiments in price competition’ and lower fares brought huge increases in flying.

The global pandemic has pushed many environmental concerns to the back burner, but the opportunities for airline subsidies and protectionism reunites the bootleggers and baptists, airlines and environmentalists seeking to raise airfares and impose higher taxes.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. This will work about as well as minimum wage laws do.

    These jokers just HAVE to meddle in markets.

    We have to keep learning the same lessons over and over and over, don’t we?

    Where’s Milton Friedman when we need him?

  2. To which jokers are you referring? The clowns in the C-Suite, who keep asking for more handouts? The local chambers of commerce, who insist support for business is the first, and only, responsibility of governments large and small, local and national? The lobbyists? The advisors to the politicians? And/or the politicians themselves?
    What gets me, given the feeding frenzy going on here…why doesn’t “Leffco” or some other “industry expert” offer up sound advice and sage wisdom to those with the purse strings? I’d happily charge 1000 USD or Euro/hour to tell the politicians just how to tell IAG/LH and anyone else who comes asking, stick it up your rear!

  3. Vienna already has the highest airport taxes in central Europe. I guess they figure if London Heathrow (LHR) can get away with even an higher passenger tax structure, why not.

  4. This is why I continue to fly low cost airlines in europe. The big 3 are so greedy and love to price gouge everyone. Hope ryanair takes them to court and win every case for cheap flying.

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